Financial markets in turmoil over fear of virus lockdowns

NEW YORK (AP) — Global stocks fell sharply Monday after central bank moves to shore up economic growth failed to dispel investor’s fears over virus controls that are shutting down global business and travel.

Dow plunges 2,250 points, 9.7%, as more of US economy shuts down, Fed makes emergency rate cut; oil prices fall sharply.

There were no glimmers of optimism: European and Asian stock indexes were down as much as 10%, as was the price of oil. Trading in Wall Street futures was halted after they fell by the maximum 5%.

The Fed on Sunday made an emergency cut to its key interest rate, slashing it by a full percentage point to a range between zero and 0.25%. The central bank said it would stay there until it feels confident the economy can survive a near-shutdown of activity in the United States.

The Fed said it also will buy at least $500 billion of Treasury securities and $200 billion of mortgage-backed securities. This amounts to an effort to ease market disruptions that have made it harder for banks and large investors to sell Treasuries and to keep longer-term rates borrowing rates down.

“Despite whipping out the big guns,” the Fed’s action is “falling short of being the decisive backstop for markets,” said Vishnu Varathan of Mizuho Bank in a report. “Markets might have perceived the Fed’s response as panic, feeding into its own fears.”

The Fed action came as major economies expanded travel curbs and closed more public facilities, raising the cost of efforts to contain the outbreak that has infected nearly 170,000 people worldwide. China, where the coronavirus emerged in December, accounts for about half of those, but a dozen other countries have more than 1,000 cases each.

Japan’s central bank similarly expanded asset purchases to inject money into the economy and promised no-interest loans to help companies cope with the crisis.

The Bank of Japan also announced plans to provide up to 8 trillion yen ($75 billion) in no-interest, one-year loans to companies that face cash crunches.

The measures came on top of stimulus from other major authorities, including the European Central Bank and the Bank of England last week.

Investors remain fearful, however.

London’s benchmark FTSE 100 index lost 7% to 4,990, Frankfurt’s DAX shed 9.1% to 8,396, and the CAC 40 in France sank 10.7% to 3,676.

The S&P 500 future stopped trading after being down 4.8% and the Dow’s was likewise suspended, being down 4.6%.

Volatility appears to be the new normal following a dizzying week in which the Dow twice fell by more than 2,000 points and also record its biggest point gain ever — 1,985 points on Friday.

The U.S. bull market that began in 2009 in the depths of the financial crisis came to an end. Many stock indexes last week suffered their biggest daily drop since the Black Monday crash of 1987 and some even logged their sharpest fall ever.

The leaders of the Group of Seven developed democracies will hold a call on Monday. European finance ministers are also discussing ways to help the economy keep going through the disruption as some countries in the region unveil stimulus plans, including guarantees for businesses and even individuals’ salaries.

In Asia, earlier, Australia’s S&P-ASX 200 fell 9.7% to 5,002.00. Hong Kong’s Hang Seng tumbled 4% to 23,063.57. In India, the Sensex retreated 8% to 31,390.07.

The Nikkei 225 in Tokyo sank to 17,002.04 while Seoul’s Kospi lost 3.2% to 1,714.86 after the central bank cut its main rate by 0.5 percentage points.

The Shanghai Composite Index declined 3.4% to 2,789.25 after the government reported retail sales fell 20.5% from a year ago in January and February after shopping malls and other businesses were closed. Factory output declined by a record 13.5% after the Lunar New Year holiday was extended to keep manufacturing workers at home.

The figures were even bleaker than economists expected. Some cut their forecasts for the world’s second-largest economy. ING said this year’s growth might fall as low as 3.6%, the weakest since at least the 1970s.

Categories: Coronavirus, National & International News